Pennsylvania among 'increasingly unequal' states

02/25/2014 04:42PM
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By ACL

The top 1 percent of Pennsylvania earners took home more than half the total increase in income over the past 30 years and saw more than 10 times as much growth in income as the bottom 99 percent, according to a new report from the Economic Analysis Research Network (EARN).

The report findings reinforce the need for a new policy direction in Harrisburg and Washington to restore broadly shared prosperity and widespread opportunity, including a much-needed increase in the minimum wage, said Mark Price, a labor economist with the Keystone Research Center and co-author of the national report, The Increasingly Unequal States of America: Income Inequality by State.

“The levels of inequality we are seeing in Pennsylvania and across the country provide more proof that the economy is not working for the vast majority of people and has not for decades,” Price said. “It is unconscionable that most American families have shared in so little of the country’s prosperity over the last several decades.”

The EARN report builds on a groundbreaking study by economists Thomas Piketty and Emmanual Saez in 2003 that documented rising inequality in the United States. They found that in the early 20th century, an era dominated by the likes of Pennsylvania banking magnate Andrew Mellon, the share of all income claimed by the top 1 percent of taxpayers rose to over one-fifth of all income in the U.S.

In the post-World War II era shaped by FDR’s New Deal and the rise of unions, Piketty and Saez observed a sharp rise in the incomes of the bottom 99 percent of taxpayers and a corresponding decline in the share of income claimed by the top 1 percent. That trend was reversed in the 1980s when employers became more openly hostile to union organizing among their employees, policymakers began lowering tax rates on top earners and corporations, and minimum wage increases largely became a thing of the past.

The result was a rising share of income captured by the top 1 percent and slowing income growth among the bottom 99 percent. Today the share of income claimed by the top 1 percent in the U.S. is once again about one-fifth of all income in the country.

In Pennsylvania, the top 1 percent took home 51.5 percent of the total increase in Pennsylvania income between 1979 and 2011. The average income of the bottom 99 percent of Pennsylvania taxpayers grew by 12.1 percent, while the average income of the top 1 percent grew by 125.5 percent — more than 10 times as much.

In the EARN report, Price and co-author Estelle Sommeiller found similar trends in most of the 50 states.

“Our study shows that this 1 percent economy is not just a national story but is evident in every state, and every region,” said Sommeiller, a socio-economist at the Institute for Research in Economic and Social Sciences in Greater Paris, France. “Nevertheless, the fact that inequality in the U.S. declined for over four decades between the 1940s and the 1970s shows that there is nothing inevitable about the extreme levels of inequality we are currently seeing.”

In Pennsylvania, the report finds that:

• The lopsided growth in incomes since 1979 resulted in a rise in the top 1 percent’s share of income from 9.3 percent in 1979 to 17 percent in 2011.

• This rise in income inequality represents a sharp reversal of the patterns of income growth that prevailed in the half century following the Great Depression’s start; the share of income held by the top 1 percent declined steadily in Pennsylvania from 22 percent in 1928 to 9.3 percent in 1979.

• In 2011, the most recent year for which data are available, the top 1 percent in Pennsylvania (with an average income of $882,574) made 20 times more than the bottom 99 percent ($43,399).

Price said policymakers in Harrisburg and Washington should take notice and embrace policies that lift the minimum wage and index it to inflation, but they should not stop there. He outlined other policies that would reduce inequality, including:

• Permitting workers to form area-wide unions in sectors like fast food, health care, restaurants, and retail, with the potential to lift up regional wages and benefits.

• Strengthening training and career structures to give workers the skills and supports to achieve economic security in today's economy.

• Turning unemployment insurance into "re-employment insurance" by combining income support for the unemployed with long-term training leading to jobs that pay decently.

• Providing universal access to high quality Pre-K programs.

“It’s clear that policies were set to favor the 1 percent and those policies can, and should, be changed,” said Doug Hall, director of the EARN program. “In order to have widespread income growth, bold policies need to be enacted to increase the minimum wage, create low levels of unemployment, and strengthen the rights of workers to organize.”